Thursday, February 26, 2004

What Greenspan Didn't Say

While I'm grateful that the Fed Chairman both embarrassed George Bush and pointed out a much needed truth by stating that the Federal deficits are a really big problem that we can't expect our selves to just grow out of, his framing of the debate was fundamentally dishonest.

Alan Greenspan seems to think that we should respond to the upcoming retirement of hordes of Baby Boomers by cutting their benefits. This, indeed, would disguise the size of our budget deficit (much as our current misappropriation of Social Security funds does). But it wouldn't really reduce that deficit.

The truth of the matter, and something you never hear on television, is that the Social Security fund is in surplus, has been for decades, and will be for decades to come. It's the rest of the Federal budget that is out of whack.

Social Security used to be pretty much a pay-as-you-go sort of deal. We'd take in roughly what we paid out, just like we claim to want to do with the rest of the government. But in the early 80's, Ronald Reagan ran into a problem. His tax cuts ans sepnding increases were inflating the Federal deficit ot unheard of levels. Instead of admitting the truth, that we couldn't afford to spend more money than ever before while drastically cutting taxes for rich people (sound familiar?)

Instead, Reagan and his budget people start, for the first time in their lives, expressing concern for the solvency of the Social Security system. The solution, of course, was to raise the payroll taxes on every single working person in the United States. This surplus, above and beyond what is needed to fund the program currently, is then loaned to the rest of the Federal government.

Conveniently enough, the government doesn't include this money borrowed from Social Security in its announced budget deficit. It's still borrowed, and it's still spent. But it's considered off the books, and doesn't go into the final number (I'm guessing that this will be somewhere short of $200 billion this year).

That's right, folks. The Bush deficits are a couple hundred billion dollars higher than announced, because this doesn't take into account that they're borrowing the Social Security surplus in addition to a crap-load of private funds. We only had a couple years where we were in a real surplus situation, and even them the surplus wasn't very big. Any intelligent person in the same situation would've used it to pay down their debt, not to fund a spending spree.

So when Greenspan tells us to cut Social Security benefits rather than dump Bush's tax cuts to balance the budget, he's really telling us Don't spend that Social Security revenue where it really came from, use it to continue hidng how fucked up our Federal budget really is.

For that's what we'd be doing. We'd be using taxes paid on earned income starting with dollar number one to offset tac cuts that only effect people who make hundreds of thousands a year (who, BTW, pay the same payroll taxes as someone who makes ninety thousand since the taxes are capped). Then we'd be cutting those same working stiffs' benefits when they retired.

This isn't too surprising. After all, one of the guys who came up with Reagan's end run around facing his deficits in the 80's was.....Alan Greenspan.